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Indofood looks to African and Mideast markets
Publicly listed food manufacturer PT Indofood Sukses Makmur plans to focus on the domestic market and new export destinations, particularly Middle Eastern and African countries, to anticipate any impacts from the escalating trade war between the United States and China
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span>Publicly listed food manufacturer PT Indofood Sukses Makmur plans to focus on the domestic market and new export destinations, particularly Middle Eastern and African countries, to anticipate any impacts from the escalating trade war between the United States and China.
Indofood president director Anthoni Salim said the company was not particularly worried about the increasing tension between the US and China, as it sold most of its products in the domestic market.
“There is still a large domestic demand that we need to meet,” he said on May 31, during a press briefing in Jakarta.
As for overseas sales, he said, Indofood would focus on exporting to countries in the Middle East or Africa that remained unaffected by the tariff war between the two economic giants.
Anthoni said the company still had a wide opportunity to expand its export market, particularly in Africa, where it could build new factories to meet the demands of the continent’s 1 billion population.
Indofood already exports its most popular product, Indomie instant noodles, to more than 60 countries including Australia, Saudi Arabia and Taiwan. It also operates factories in Egypt, Ethiopia, Kenya, Morocco, Nigeria and Sudan, as local demands continue to rise.
“There is still a large domestic demand that we need to meet.”
Anthoni estimated a 10 percent increase in sales to meet the expected sharp demand during Idul Fitri, driven mostly by its food and beverages segment.
Despite the projected sales growth, finance director Thomas Tjhie said Indofood was targeting “high single digit” growth this year, although he declined to state a figure.
The company appears to be on track in achieving its target. Indofood recorded an 8.73 percent increase in revenue to Rp 19.17 trillion (US$1.34 billion) in the first quarter, while its profit increased 13.53 percent year-on-year (yoy) to Rp 1.35 trillion.
Thomas said the company had allocated Rp 7.4 trillion in capital expenditure to achieve its 2019 growth projection. He added that this year’s capex would be financed through a combination of internal funds and bank loans.
He said that Indofood was also allocating Rp 3.9 trillion to its consumer brand product manufacturing subsidiary, Rp 1.4 trillion to its flour mill subsidiary and Rp 200 billion to its distribution business.
It had also allocated Rp 1.9 trillion to its agribusiness line, for expanding its oil palm plantations, said Thomas. However, since the government had imposed a moratorium on expanding oil palm plantations, the company would proceed with its expansion plans by planting new oil palms and using high-quality seeds to boost productivity.
Although Indofood had initially announced in February that it would issue bonds this year to refinance its Rp 2 trillion bonds that would be maturing on June 13, Thomas said it had decided to cancel the plan.
“After much deliberation, we decided to cancel the bond issuance because the current market isn’t too favorable for us because of the high yield,” he said. Instead, the company had opted to seek bank loans to refinance the debt and ensure timely repayment.
The company also planned to buy back 25.66 percent of public shares in its Singapore-based subsidiary, Indofood Agri Resources Ltd. (IFAR), which it planned to delist from the Singapore Exchange.
Indofood recently raised its share price from S$0.28 (21 US cents) to S$0.33, the same as the dividend per share for IFAR it paid in 2018.
